Major operators, backed by strong financial resources, are consolidating the market as they seek to control supply and distribution. This means independent operators, which have limited resources to make the investments needed to both update their sites and meet regulatory standards, are in a position of relative weakness as they compete with leading private groups.
In markets such as France, these major private groups already own more than half of the outdoor accommodation supply in terms of sales. There have been numerous acquisitions of 3* and 4* campsites by private groups, especially in France, but also in southern European markets too. Likewise, there have been many deals involving mobile home operators while consolidation has also taken place among distribution players.
France, however, is also a good example of a country where some independents do still run high-end and successful premium sites which have been owned by particular families for many years.
The key for all operators is to reach a critical size whereby they can achieve competitive advantages which give them the ability to increase financing capacity for the acquisition of new sites and mobile homes, and increase their bargaining power with the providers of mobile homes.
Greater size also equates to economies of scale in terms of marketing, the ability to build stronger brand awareness, and a diversification of the international client base.
The resilience of the market in the downturn and its continued growth has fuelled significant interest from private equity which is well positioned to support the required level of investment needed across the industry. For instance in the UK at least seven park operators are backed by private equity in one form or another.
The competition for campsites has been particularly intense in touristic regions such as the south of France, and on premium sites. Leading players have also focused their attention on the internationalisation of their activities through the acquisition of mobile home operators and online travel agencies (OTAs). This enables rapid growth with lower investment, enlarges portfolio size, and gives access to premium campsites which are not for sale.
Given the strong competition we have seen a rise in EBITDA multiples paid in recent acquisitions.
Acquirers, and especially PE funds, have also started to take into account the potential value of real estate assets in the camping industry via sale and leaseback mechanisms. These are transactions in which the owner-occupant sells the land and buildings used in its business operations to a special purpose investor and then simultaneously leases the property back from the investor.
In an environment where yields on traditional asset classes (such as offices and commercial assets) have continuously been compressed, the outdoor accommodation market represents a viable alternative asset class for real estate companies.
M&A in France
Many of the top private groups, as well as mid-scale groups, have been the subject of buyouts by private equity in recent years. This has given them the firepower to be very acquisitive in the market and buy mid-sized campsites.
Acquired by the Carlyle Group in 2014, Homair Vacances has become one of the most acquisitive players across Europe. It has bought Eurocamp and Al Fresco in the UK, as well as the European Camping Group (ECG), a leading player in the Dutch, Danish and German markets. In total, Homair now manages approximately 20,000 holiday homes and tents across Europe. Clearwater International advised Homair and its major stakeholder Montefiore Investment on the Eurocamp deal, while we also advised ECG on its sale.
In 2014, Clearwater International advised Odalys Vacances, a major French player in the tourist market, on the sale and leaseback of a portfolio of outdoor accommodation sites.
Another leading PE-backed player is Vacalians. Since Permira invested in the business in 2015, the company has acquired Canvas Holidays, the second largest UK operator and a major player in the Netherlands. Vacalians now operates more than 25,000 pitches across Europe, of which 20,000 are equipped with mobile homes, chalets or tents, on 269 sites located mainly in France, Italy and Spain.
Siblu was acquired by Stirling Square Capital Partners in 2015. The company operates premium 4* holiday parks across France and is a market leader in the owner-occupier model of site management.
Another player is Sandaya which owns 4* and 5* campsites across France and Spain, and which was acquired by Apax Partners in 2016. The company plans to step up its development in France and elsewhere in Europe as part of a €150m investment.
In the UK there has been notable M&A activity around the outdoor accommodation sector in the past few years and the market is rapidly consolidating. However, with around 200 holiday parks still not part of a large group, this consolidation drive has a way to play out yet. Vendors are often still reluctant to sell up, and when parks do come on the market there is strong competition.
Clearwater International has been involved in a string of deals in the sector. In 2013, we advised holiday park operator Park Resorts on a debt and equity refinance which paved the way for a €70m investment in the business by private equity group Epiris.
In 2015, Epiris merged Park Resorts with Parkdean Holidays, owned by Alchemy Partners, to create the UK’s biggest holiday park operator with 73 parks. Parkdean Resorts was subsequently acquired by Onex Corporation, a private equity firm based in Canada, in December 2016.
In 2016, Clearwater International also advised Palatine Private Equity on its investment in Verdant Leisure, a boutique holiday park operator offering self-catering holidays and holiday home ownership across Scotland and Northumberland. The investment supported further development and organic growth across the existing parks as well as funding for further acquisitions.
We also advised the shareholders of holiday park operator Away Resorts on its sale to mid-market private equity house LDC in 2015, and have recently advised Away Resorts on a significant debt facility to support its acquisition of Sandy Balls Holiday Village in the New Forest.
Several other major park operators have also recently received new investment. For instance in December 2016 specialist asset manager Intermediate Capital Group purchased Park Holidays, a caravan park operator with 26 parks, for €430m, a significant increase on the €200m that Caledonia paid for the business in 2013.
Eariler this year upmarket holiday park operator Park Leisure 2000 was acquired by Midlothian Capital Partners and a consortium of investors for €120m, providing an exit for CEO and co-founder Gary Molloy.